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FABSF

WEEKLY LETTER

Number 93-28, August 20, 1993

Economic Impacts of Military Base
Closings and Realignments
On July '1, 1993, the Base Closure and Realignment Commission recommended changes that
would result in a net loss of 62,400 military and
civilian jobs nationwide. The Commission's recommendations have been approved by President
Clinton, and Congress is not likely to challenge
them. Under the Commission's plan, half of the
nation's net job losses would be in the Twelfth
Federal Reserve District, with most of those in
California.
This Weekly Letter examines the impact of base
closures and realignments on the western economy. While the changes are small relative to the
District economy, they loom large for regions in
which military bases provide a large proportion
of the area's total jobs. The economic impact of
the base closures over the longer term depends
on the conversion process itself, and how the
property ultimately is used.
The role of military bases
in the Twelfth District economy
In December 1989, military bases in the nine
Twelfth District states employed 210,000 civilian
workers and 417,000 adive-duty military personnel. Thus, military bases accounted for 3.2 percent
of total employment in District, with significant
variations within the District. California's dependence on military base employment was a little
lower than average in 1989, at 2.8 percent. Four
District states derived a greater percentage of
their employment from military bases: Hawaii
(14.5 percent), Alaska (11.3 percent), Washington
(3.9 percent), and Utah (3.8 percent). In Oregon,
military bases accounted for only 0.1 percent of
total employment. ,'v1i1itary bases provided a
somewhat larger proportion of total jobs in Idaho
(1.6 percent), Nevada (1.8 percent), and Arizona
(2.3 percent).

Since bases are not distributed uniformly within
these states, some communities are highly dependent on military bases for their livelihoods.
For example, Fort Ord and the Monterey Presidio
accounted for 19 percent of the Monterey (California) area's total employment in 1989. In San
Diego, the overall economy is much larger, but
there are so many large military installations that
together they accounted for 10 percent of total
employment. More typicaiiy, military installations
provided between 1 and 5 percent of the jobs in
western communities with large bases.
Base closures and realignments·
The list submitted this summer was the third
round of changes under the Base Closure and
Realignment Act. The 1988 round cut 13,100 jobs
at military bases in the Twelfth District, while the
1991 round cut a further 19,700. The cuts included
in the 1993 list are much larger than either of the
two earlier rounds, with a net loss of 31,300 jobs
in the West. Further cuts will come in the 1995
and 1997 rounds called for by the Act.

Western cutbacks are concentrated in California.
'vVhen the three rounds announced to date are
completed, bases in California will have seen
a net job decline of 78,500, or 22 percent. In
Utah, employment will have fallen by 2,500, or
9 percent. The declines in Oregon and Arizona
will be much smaller, while in Hawaii and Idaho
gains from earlier rounds will be offset by subsequent cutbacks. There will be no changes in
Alaska, and a very small net gain in Nevada.
Washington, in contrast, will add a net 17,000
jobs at military bases, a gain of 20 percent.
Employment effects
The direct employment effects of base closure,s
and realignments are quite small in the Twelfth

THE WESTERn ECOnOmy

The Western Economy is a quarterly
review of economic conditions in the Twelfth Federal Reserve District. It is published in the Weekly Letter
on the third Friday of February, May, August and November.

FRBSF
District, with the net job losses from all three
rounds amounting to only 0.3 percent of total
employment. However, the effects vary widely
within the West. The Monterey and Vallejo metropolitan areas in California are most affected,
with announced changes leading to the direct
loss of 13 and 6 percent of jobs, respectively. Several other areas, all in California, will see more
modest, but still significant, direct job losses of
between 1 and 2 percent. These areas include
Oakland, Riverside-San Bernardino, Sacramento,
and San Francisco. In some metropolitan areas,
certain communities would be hit much harder,
such as Alameda in the Oakland area. In contrast,
other areas stand to gain significantly. Personnel
will be transferred to the San Diego, Puget Sound
(Washington), and Fresno (California) areas.
In addition to the jobs lost (or gained) on bases,
there would be "secondary effects" for communities in which changes occur. For example, at
bases where jobs are cut, secondary effects would
include lost business for firms whose customers are
employed at the base and for firms that supply
goods or services to the base, and lower property
values. For communities that depend heavily
on military bases, the economic impact of the
changes will be large. A frequently used "rule of
thumb" holds that each job lost (or gained) due to
an exogenous change leads to one secondary job
lost (or gained) in the affected community. For the
District as a whole, however, the direct and secondary job losses are likely to be dwarfed by other
economic factors, especially since most of the
cutbacks are spread over several years.

Longer-term effects of base closures
When a military base is closed, the economic
effects due to the initial job losses and their associated secondary effects can be mitigated if the
base ultimately is converted to alternative uses.
California bases that were closed in the 1970s
currently are serving a wide variety of public and
private sector uses. Most of these sites provide
some jobs, though generally fewer than the military bases did. One exception is the former Benecia Arsenal (California), now an industrial park,
which provides more than twice as many jobs.
Planned or possible uses for military bases slated
for closure include industrial parks, airports,
prisons, parks, and local government facilities.
The amount of time from the decision to close a
base to the successful conversion to civilian use

varies greatly. The base closure itself usually
takes place three to six years after the decision is
made. All of the Twelfth District bases slated for
closure on the 1988 and 1991 lists still had per~
sonnel on duty at the end of 1992.
The conversion process can be lengthy if the
base has toxic contamination or unexploded ordnance, which must, by law, be cleaned up before
the military can relinquish title to the land. At
least two of the bases slated for closure on the
1993 list, EI Toro Marine Air Corps Station and
Mare Island Naval Shipyard (both in California),
have such extensive contamination problems that
the Environmental Protection Agency has designated them as Superfund sites. In these cases, the
clean-up process itself could generate a significant number of jobs.
In some cases, the conversion process has been
delayed by disagreements among local authorities regarding how the property should be used.
For example, litigation among neighboring communities regarding control of George Air Force
Base in San Bernardino County, California has
delayed the conversion there. In contrast, the
process is farthest along when local authorities
agreed early on about how the property would
be used, which jurisdiction would coordinate
the process, and which public or private entity
would ultimately hold title to the land. For example, the transitions have been relatively smooth at
the Presidio of San Francisco, which will become
part of the Golden Gate National Recreational
Area, and at England Air Force base in Louisiana,
which had a major tenant in place even before
the base was closed.

Conclusion
The western economy is large enough that the
changes called for by the Base Closure and Realignment Commission are unlikely to have significant effects on the area's overall economic
health. However, some parts of the West will see
large job losses and a few will see significant
gains. Communities in which bases are closed
can recoup some or all of those losses over the
long term if the bases are put to job-creating
civilian uses. While a few communities can complete the conversion relatively quickly, for most it
will be a long process.

Carolyn Sherwood-Call
Economist

DISTRICT INDICATORS
(Seasonally Adjusted)

9302

9301

9204

9203

9202

9201

9104

9103

AGRICULTURE
US. crop prices, 1985=100

112.1

109.1

1092

1079

107.9

109.7

110.7

114.6

District crop prices, 1985=100

115.7

108.6

112.1

110.4

101.3

116.5

107.5

120.6

2,885.9

2,580.1

2,740.7

2,563.2

2,468.1

2,535.6

2,655.9

2,528.0

90.2

90.2

91.1

91.4

86.5

86.1

81.1

84.4

67.3

64.6

58.4

60.1

58.4

59.1

62.1

62.6

Farm cash receipts, million $
Cattle-on-feed, 1985=100
Cattle prices,

Cal~omla,

$ICw!.

FORESTRY
Lumber production, millions board feet

1,231.3

1,316.4

1,426.9

1,385.6

1,369.1

1,431.4

1,370.5

1,418.8

Northwest lumber Inventory, m"'ons board feet

2,072.1

2,016.3

2,088.8

2,198.1

2,267.8

2,203.8

2,314.1

2,395.4

194.0

245.1

162.9

147.9

153.1

156.8

137.9

131.6

U.S. lumber prices, 1986=100

ENERGY
Spot price of oil, $lbarrel

19.8

19.8

20.6

21.7

21.1

18.9

21.8

21.6

865.9

U.S. rig count

861.0

860.1

861.6

868.9

863.7

877.9

891.6

District rig count

50.9

50.2

63.9

60.8

65.9

54.6

63.2

74.5

Fuel mining employment, 1985=100

60.3

60.6

67.4

68.2

70.2

70.6

70.1

72.6

U.S. seismic crew count

78.7

75.7

73.7

71.7

80.7

80.2

89.9

98.9

MINING
Minerai prices, 1986=100

98.9

Metal mining employment, 1985=100

99.5

99.2

105.3

107.0

105.9

104.1

104.5

171.7

176.3

177.5

179.0

180.1

182.5

180.6

184.1

CONSTRUCTION
Nonresidential awards, 1985=100

Western housing starts, thousands
Construction employment, thousands

96.4

98.8

97.2

94.6

102.4

111.0

103.2

94.5

19,600

Residential permits

18,624

21,147

19,538

18,922

19,564

19,749

18,488

28.9

19.0

21.2

26.3

26.7

21.9

19.5

24.1

865.9

861.0

860.1

861.6

868.9

863.7

877.9

891.6

MANUFACTURING
Wages,

Cal~ornla, $Ihour

12.3

12.2

12.3

12.3

12.2

12.1

12.1

11.9

2,765.3

Employment, thousands

2,795.8

2,803.5

2,841.5

2,870.4

2,885.5

2,901.7

2,930.3
95.2

Durables, 1985=100

85.4

86.5

89.4

90.5

92.0

93.3

94.0

Constnuction durables, 1985=100

87.0

88.0

92.1

91.7

94.1

94.5

93.6

95.3

Aerospace, 1985=100

86.9

89.5

93.6

97.3

100.4

104.0

106.4

107.6

Electronics, 1985=100

80.7

81.0

85.3

85.7

86.8

87.6

88.8

90.4

Semiconductor orders, mil. $, not s.a.

2,107.2

2,048.9

1,931.0

1,713.5

1,544.4

1,437.5

1,377.4

1,273.7

Whlslretall trade employment, thousands

4,655.5

4,667.9

4,658.7

4,669.2

4,682.5

4,672.4

4,706.5

4,717.6

$

N/A

26,419

26,482

26,167

26,105

26,412

25,513

25,822

Services employment, thousands

Retail sales, Pacnlc District, mil.

5,575.9

5,559.6

5,540.6

5,505.4

5,489.6

5,450.4

5,461.1

5,432.9

Health care, 1985=100

135.2

135.0

134.5

133.6

133.0

132.2

131.3

130.0

Business services, 1985=100

115.8

114.9.

113.5

112.8

113.2

112.6

112.1

112.5

Hotel, .1985=100

128.8

129.6

132.1

130.3

132.0

132.5

133.4

131.2

Recreation, 1985=100

142.2

142.1

141.2

140.9

139.4

139.0

139.7

139.0

1,220.6

1,223.2

1,223.7

1,223.7

1,'227.0

1,223.2

,,223.0

1,223.6

Finance, insurance, and reai sMaie empi.• thousands

GOVERNMENTEMPLOYMENT,THOUSANDS
Federal government
State and local

588.8

603.2

610.2

610.8

609.4

616.4

618.1

616,8

2,944.1

2,931.7

2,927.8

2,946.0

2,920.5

2,915.3

2,900.1

2,901.8

Data are weighted aggregates of available 12th District data constnucted by FRBSF staff from public and Industry sources.

Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of
San Francisco, or of the Board of Governors of the Federal Reserve System.
Editorial comments may be addressed to the editor or to the author.•.. Free copies of Federal Reserve publications can be
obtained from the Public Information Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120.
Phone (415) 974-2246, Fax (415) 974-3341.

~

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Twelfth District Business Sentiment*
GDP

PERSONAL INCOME
Annualized Percent Growth Rates
Percent

9301

9204

Idaho
Nevada
Oregon
Utah
Washington

5.2
-6.5
-5.6
-1.2
-3.8
-4.1
-2.4
-5.6
-7.0

9.9
14.0
7.1
45.2
21.2
18.9
9.6
13.7
17.5

12th District
U.S.

-5.3
-6.2

10.3
14.8

Alaska
Arizona
California

Hawaii

9203

1.1

9202

9201

3.6
4.7
-23.8
3.8
7.7
7.5
7.7
5.1

1.0
6.4
4.7
3.9
8.9
3.4
4.5
5.3
4.9

17.6
7.6
4.4
19.1
0.8
8.9
9.5
9.5
10.9

4.1
3.3

4.8
4.8

6.2
7.3

o Recession
o Growth less than 2.5%
III 2.5% to 3% growth
•

20

0
01

02 03

1990

0'

01

02

03

0'

1991

01

02

03

0'

01

1992

02

1993

• Expectalions for GOP growlh during the next four quarters based on a
survey of approxjmalely 75 business leaders in the 12th Federal RBserveDistrict.

• Year-to·date

UNEMPLOYMENT RATES
Average Ouarterty Data

NON·AGRICULTURAL EMPLOYMENT
Annualized Percent Growth Rates

9302

9301

9204

9203

9302

9202

9301

9204

9203

9202

Alaska
Arizona
California
Hawaii
Idaho
Nevada
Oregon
Utah
Washington

-5.0
1.0
-1.1
-0.2
0.5
0.3
-0.4
4.4
-1.5

7.9
1.4
-1.5
-0.2
4.9
4.8
4.0
6.4
2.5

2.0
0.4
·2.5
-2.8
2.7
5.0
2.0
3.1
3.4

-0.7
5.0
-1.4
·3.2
3.7
4.5
0.1
3.8
-0.2

-2.7
4.3
0.0
0.2
4.2
2.2
2.8
2.8
0.7

Ataska
Arizona
Catffomia
Hawaii
Idaho
Nevada
Oregon
Utah
Washington

8.1
6.5
8.8
4.7
6.8
6.9
7.5
4.1
7.7

8.0
7.6
9.6
4.5
6.6
6.8
7.1
4.1
7.6

8.9
7.4
9.9
4.8
6.5
6.4
7.3
5.4
8.0

9.3
7.0
9.4
4.6
6.4
7.2
7.7
5.0
7.5

9.2
7.3
8.7
4.1
6.2
6.5
7.5
4.6
7.2

12th District
U.S.

-0.6
1.9

0.3
1.9

-0.7
1.1

-0.3
0.8

0.8
1.3

12th District
U.S.

8.1
7.0

8.6
7.0

8.9
7.3

8.5
7.6

8.0
7.5

* Year-ta-date

• Year-to-date

03

Growth above 3%